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Dear Brass Tax Presentations,
My client claimed a qualified commercial clean vehicle credit through his S-corporation, and the credit was listed on form 3800. However, the IRS sent a notice stating that Form 8936 was incomplete or missing. If I entered the same information on the individual module, 8936 would show $15,000 instead of $7,500. Can I just send form 8936 from S-corporation, or is there any other way to enter the information on the individual module?
Please advise.
From Brass Tax Presentations
From the information supplied, I’m having trouble deciphering whether or not you prepared the S-corp return. I will answer this question from S-Corp to individual and how I believe you should respond to the IRS notice.
S-Corp, on its 1120-S, should have filed Form 8936, which should have appeared as a flow-through credit on Schedule K and your clients’ K-1.
On the individual return, sometimes that clean vehicle credit flow through needs to be entered on your clients’ Form 8936 in Part V, Line 20. That is unless the only clean vehicle credit on that client’s individual return is the pass-through credit from the entity. The instructions for Form 8936 clearly state that the individual does not need to file Form 8936 if their only clean vehicle credit is passed through from a partnership or S-corporation. If your client only has clean vehicle credits passing through from the entity and no other clean vehicle credits at the individual level, the credit should just flow right over to Form 3800 (meaning you did it properly).
I would respond to the IRS notice and explain that the individual’s only clean vehicle credit was the commercial clean vehicle credit which passed through from the S-corporation. Tell them that the instructions for Form 8936 clearly state that the individual should not file this form if their only clean vehicle credits for the year are passed through from a partnership or S-corporation.